My First Investment-DEAL OR NO DEAL?! :)

[Courtney Rollins]

MY FIRST INVESTMENT-DEAL OR NO DEAL!?

I'm so grateful to the BP community. The many generous and knowledgeable people and resources are a blessing to a newbie like me. I was just introduced to the world of real estate investing ,like so many of us, after reading Rich Dad Poor Dad in a book club this past December 2018. It light a fire in me and I've dove in reading everything I can get my hands on, attending the Maryland REI meetups, meeting with several local investors in Baltimore, and of course soaking up as much of what BP has to offer.

After making several offers on several places this past month, I’ve had one accepted and is now under contract. It is located in a class c neighborhood in transition located in an opportunity zone in southwest Baltimore (Union Square neighborhood). My partner and I plan to live in it for 6 months - 1 year then will turn it into a rental. We expected to put in about $3,000 in repairs during this time. However, the inspection report indicated that there are foundational issues that could be serious or minor (whatever that means) and the roof also needs attention. We plan to go back to seller and ask for reduction in price or to repair issues, but we want to plan for worst case scenario. However, the biggest issue is that we are currently renting and our lease is up by Feb 28! Which means if we don’t close on this property we will need to rent. I don’t want to rush into my first deal that will be a money pit, but I also don’t want to go back to renting in March. Either way, it continues to be a great and anxiety inducing learning experience. Thanks for any advice or insight!

Here are some of the numbers.

• 4 Bedrooms 3.5 bathroom row house
• Under contract at $109,900 purchase cost
• Comps & ARV $126,000
• Conventional loan at 20% & 5.8% interest, 30 years
• Full seller’s help
• Initial estimated cost of repairs: $5000 (however now unsure due to foundational and roof issues)
• Anticipated cash flow: $284

Major issues:

• There was significant ponding and evidence of leakage on roof. Additionally, there are a number of areas that require re-sealing (at chimney and vent boot in rear, and at unused plumbing vent that dumps into ceiling below).
• Needs caulking/sealing throughout exterior, particularly around windows and doors.
  • Windows in rear are trimmed without appropriate materials, or not trimmed at all.
  • Additionally, there is evidence at a number of windows of moisture penetration.
• There is significant deterioration of framing members in basement ceiling has led to a moving and sloped floor above. Walls have moved and previous repair was inadequate and unprofessional. I think I need a structural engineer/licensed professional to evaluate and repair floors under kitchen and common living areas on 1st floor.